SEC Changes Filer Definitions

SEC Changes the Accelerated and Large Accelerated Filer Definitions

On March 12th, the SEC adopted the highly anticipated amendments to the accelerated and large accelerated filer definitions. As a result, an issuer that is eligible to be a smaller reporting company (SRC) with less than $100 million in annual revenue will no longer be required to obtain an audit of its internal control over financial reporting (ICFR) and will have more time to file its periodic reports on Forms 10-K and 10-Q.

What Has Changed?

A summary of the revised initial qualification thresholds for determination of filer status compared to the current thresholds is as follows:

Current thresholds Revised thresholds
Non-accelerated filer Public float is less
than $75 million
Public float is less than $75 million

-OR-

Public float is between $75 million
and $700 million and annual revenue
is less than $100 million

Accelerated filer Public float is at least
$75 million, but less than
$700 million
Public float is at least $75 million, but
less than $700 million and annual revenue
is $100 million or more
Large accelerated
filer
Public float is $700 million
or more
Public float is $700 million
or more

Accordingly, registrants that will no longer qualify as accelerated filers are those with annual revenue of less than $100 million and public float between $75 million and $700 million.

In addition to amendments that add a conforming revenue rest for exiting accelerated filer and large accelerated filer status, the SEC also increased the public float transition thresholds for exiting accelerated and large accelerated filer status to 80% of the initial qualification thresholds as follows:

Current public float threshold
for exiting status
Revised public float threshold
for exiting status
Accelerated filer Public float is less
than $50 million
Public float is less
than $60 million
Large accelerated
filer
Public float is less
than $500 million
Public float is less
than $560 million

A Business Development Company (BDC) will also be excluded from the definition of an accelerated filer if the BDC has (1) public float of at least $75 million, but less than $700 million and (2) investment income1 of less than $100 million. BDCs will apply the same transition provisions for accelerated and large accelerated filer status that apply to other issuers (as outlined above, using investment income instead of revenue).

What Hasn’t Changed?

The amendments do not change other key protections from the Sarbanes-Oxley Act of 2002, such as CEO and CFO certifications of financial reports, or the requirement that companies continue to establish, maintain, assess and report on the effectiveness of their ICFR and disclosure controls and procedures. Further, auditors are still required to obtain an understanding of a company’s ICFR in order to plan their audits, are required to consider control defects that come to their attention and may test controls in order to place reliance on internal controls and reduce substantive audit testing.

When Are the New Rules Effective?

The amendments are effective 30 days after publication in the Federal Register and apply to annual reports due on or after the effective date.

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Michelle Mackey
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